Owning Home Is Not Right For Everyone

For Low-income Families, There Are Many Risks Of "the Unexamined Goal.''

June 6, 2004|By David Wessel, the Wall Street Journal

Every American family should have enough to eat, access to decent health care and a good school for its kids. But should every American own a house?

You'd think so if you listen to President Bush and other politicians or read ads placed by mortgage giants Fannie Mae and Freddie Mac.

"We want people owning something in America. That's what we want," Bush said. "The great dream about America is, I can own my own home, people say. . . . The more people who own their home, the better off America is."

This isn't new. The Labor Department launched an "Own Your Own Home'' campaign in 1918. A slew of New Deal programs in the 1930s were designed to put homeownership, once reserved for the wealthy, within reach of more middle-class Americans. Government policies and financial-market innovation in the past decade have made low-income homeownership -- an oxymoron just a generation or two ago -- possible.

At last count, 68.6 percent of U.S. housing units were owned by the folks who live in them, more than ever before. Yet the government isn't satisfied. The Department of Housing and Urban Development is proposing to guarantee mortgages without requiring any down payment, asking Congress to eliminate the 3 percent down payment now required. The rental-apartment lobby blasts this as a "homeownership at all costs" policy. HUD vows to scrutinize applications carefully.

"We will have some defaults," Federal Housing Commissioner John Weicher said, "but nearly all those families will remain homeowners."

Homeownership is -- to borrow the title of a collection of papers by housing scholars published a couple of years ago -- too often "the unexamined goal." It is, said Nicholas Retsinas of Harvard's Joint Center for Housing Studies, one of the book's editors, too often the quick answer to every question: "Better neighborhoods? More homeowners. Better schools? More homeowners."

That's unwise. Owning a home isn't right for everyone. It isn't smart for every low-income family. And the unrelenting political fixation with homeownership as the country's top housing priority diverts attention from ways to get more affordable rental housing. More than 40 percent of renters spend more than 30 percent of their income on housing. The usual definition of affordable is less than 30 percent of income.

The modern case for homeownership rests on three arguments. It's a good investment for families, the only significant asset for many families. It's good for neighborhoods. (As Harvard President Lawrence Summers likes to say, "No one in the history of the world ever washed a rented car.") And it's good for the United States because it gives more people a tangible stake in the society.

There is much merit in each argument.

But there also are risks, too often unacknowledged, to encouraging every working-poor family to buy a house -- especially if the only houses they can afford are in places where prices aren't likely to rise or if they don't earn enough to meet mortgage payments and maintenance needs.

And then there is the fact that fascination with homeownership overshadows discussion of ways to make available more affordable rental housing. "A large segment of our society will not be able to afford to become homeowners," said Ghebre Selassie Mehreteab, chief executive of NHP Foundation in Washington, D.C., one of the largest nonprofit owners of affordable rental units. "For many, many years to come, we'll always have renters."

Consider the lack of attention to far-reaching changes that the Bush administration is making, and the others it is proposing to make, to save money on the vouchers the federal government offers to help nearly 2 million low-income families pay the rent. Advocates for the poor are screaming that the poor will suffer. The administration insists that isn't so. Still, the debate gets little attention.

Consider the grandly named Millennial Housing Commission that Congress created in 2000 to think about all these issues. The panel's May 2002 report said, "The stock of affordable housing units is shrinking," especially for very low-income families. It offered some thoughtful solutions, including a new "preservation tax credit" for landlords who sell apartment buildings to outfits that agree to keep rents low. The report never got a hearing and now gathers dust on bureaucrats' bookshelves.

Or consider the reality that jobs have moved to suburbs where state or local zoning or land-use rules often restrict construction of affordable rental housing.

Perhaps, Harvard's Retsinas suggests, it's time for the U.S. government to consider using transportation aid as a lever to prod state and local governments to alter those rules so lower-wage workers can live where there are jobs.

You don't hear much talk about any of that. It's hard to get public, press and political attention for such ideas when everyone is encouraged to believe that homeownership will solve it all.